Should a Home Owner Refinance?

By
Real Estate Agent with Long & Foster

        When interest rates are low, many  former clients ask if they should consider refinancing.  While refinancing may sound like a good idea, it may not make sense for everyone.

            If asked, I tell my clients about the general rule-if the current interest rate on their mortgage is at least 2% higher then the present going rate, refinancing might be the thing to do.

            I also ask my clients how long they plan to stay in their house after refinancing.  Again, there is another general rule- plan to stay in your home for at least 3 years to be able to see the full effect of the savings on refinancing.

            Homeowners need to understand that in many ways refinancing is a similar to their experience of applying for the original loan.  A new application needs to be made and there will be a credit check.  Costs and fees will be involved.  The bank charges fees; there are costs for a new appraisal, survey and title search.

            A title attorney gave me this formula to help with the decision to refinance-divide the total cost of refinancing by the monthly amount you will save.  This will give you a break even point.  If a home owner plans on staying in their house past the break even point, it might be worth while to refinance.

    I like this refinancing calculator: www.mortgage101.com/calculator/refinance

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